The popularity of foreign exchange entices forex traders worldwide from newbies exploring the opportunities in the market to experienced and well-established experts.
With non-stop round-the-clock sessions, access to global markets, significant leverage, and generally low costs, forex trading seems natural, effortless, and profit-making. But there is a catch; it is also easy to lose money while trading forex. Many traders enter the market in haste, but losses and setbacks force them to quit at the same speed.
Here are a few ways to avoid losses in the highly competitive and risky Forex market.
Homework: Learning about forex is vital for a trader’s success. The significant portion of knowledge comes from live trading and experience. A trader should learn about the forex markets, including factors like geopolitical and economic issues affecting currencies. Homework is an ongoing effort to prepare to adapt to varying market conditions, statutes, and world events. The process involves developing a trading plan – a systematic method for screening, evaluating investments, and determining the risks.
Finding a reputed broker: Compared to other financial markets, the forex market has fewer omissions. Hence, a trader may work with a broker with little or no reputation. Before delving into the market thoroughly, the trader should confirm the trustworthiness of the broker because the overall integrity of the broker is essential for the safety of deposits, as well as the chances of profiting in the forex market.
It is vital to check whether the broker is registered or not.
Practice account: Alternatively, known as a demo account. A demo account helps raise levels of readiness and reduce the possibility of losing money. Most forex trading platforms offer a demo account that allows and trains the trader on order-entry techniques. It is common for a new trader to inadvertently add to a losing position instead of exiting the trade. So, to prevent losses at a later date, trading on a practice account is advisable.
Clean charts: New traders get tempted to take advantage of all the technical analysis tools offered by the trading platform. Most of the indicators are ideal for the forex markets, but traders should use analysis techniques to a minimum for them to be effective. Using multiples of the same types of indicators, such as two volatility indicators or two oscillators, are redundant and can provide conflicting signals. Remove unused analysis techniques from the chart. Traders should also pay attention to the overall look of the workspace. The colors, fonts, and types of price bars line, candle bar, range bar, should offer an easy-to-read-and-interpret chart, which allows the trader to respond effectively to varying market conditions.
Protecting the trading account: In the forex markets, the prime focus is on making money, but it is essential to learn to avoid losses. Money management methods is a vital part of successful trades and the entire trading process. It is not about how traders enter the trade, but what matters is how they exit. Using protective stop-loss is an effective way to ensure losses are minimal.
Lastly, it is best to start small when entering live trading. Starting small will add value to trades and increase confidence. If you are keen to start your forex trading journey, search for trading forex Malaysia or forex brokers in Labuan today.